U.S. Government can't control its spending addiction: Ron Paul

Former Rep. Ron Paul, (R-TX), provides his take on the Fed and what a taper could mean for the economy and markets.

In a wide-ranging interview Wednesday, former Rep. Ron Paul told CNBC that the federal government's addiction to spending puts the country on a dangerous path and that he would support a congressional proposal to defund Obamacare.

Paul said that he would "insist that people cut back" on spending and that if the government continues on its current course, it will end up like Detroit. "Many, many cities, towns and states—and the country—could face a Detroit [situation] because of the fundamentals," he added.

"It's tough because it's like an addiction," he said. "I would always make the case that continuing the addiction of spending and deficits and printing money, manipulating the economy is much, much worse than taking your medicine, which would mean that you've got to quit."

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Ron Paul speaking at George Washington University in March

Americans can't expect the government to police the world and provide an "endless welfare state," Paul said. Unless some major change happens, he added, the government will remain in a stalemate.

When asked whether he would have supported Sen. Ted Cruz (R-TX) in an effort to defund Affordable Care Act, often referred to as Obamacare, Paul said, "Yes, I would think that you would have to what is necessary. If you continue the process, it just makes things worse. It delays the inevitable. … if we don't do it, the consequences will be so much greater."

However, he said, Congress is unlikely to follow through and will use "scare tactics" to make the public to believe this level of spending is necessary.

Paul has also been a vocal critic of the Federal Reserve, which he believes should be abolished. Regarding the potential group of nominees for Fed chairman, Paul said "I'd pick none of the above, because I don't think it makes any difference. The all endorse the principle of manipulating interest rates and believing that they can decide how much money supply there should be."

"One individual might manage things slightly differently, but overall it would be the same thing. It's still the monetary system that we have to deal with, not the particular manager," he said. "A few individuals and one in particular behind the scenes in secret pretending they know what interest rates should be … it's positively amazing that the economy tolerates it."

Paul said gold, which he acknowledged is a part of his personal portfolio, should be a long-term investment and an insurance policy against government actions. "We do know that governments will continue to spend, the deficit problem hasn't been solved. … The employment statistics are not quite as rosy as some people believe," he added.

"We're in big trouble. ... There is a lot of inflation, a lot of unemployment. To say that gold went down in the last year, that doesn't tell you a whole lot. You've got to look more long term and you have to look at the basics," he said. "I think most people who study free market economics know that this is very, very fragile. The dollar is fragile. I think people should be more cautious than overly confident."